Overtime rule is invalid, says Texas district court

The Obama-era overtime rule increasing the minimum salary for exempt workers from $23,660 to $47,476 has been struck down by the U.S. District Court for the Eastern District of Texas.

Business groups and a collective of 21 states filed parallel lawsuits challenging the overtime rule, which were combined by the Texas district court. That court already issued an injunction on the rule in November 2016, blocking it for further examination only days before it was to take effect.

But on August 31, 2017, the district court went one step further, ruling that the increased salary in the Department of Labor’s (DOL’s) overtime exemption rule raised the minimum salary so high that too many individuals who performed exempt duties would still be ineligible for an exemption.

Congress intended a focus on the duties tests

Such a high salary, said the court, shifts the focus away from the duties tests, effectively eliminating them. A shift in the meaning intended by Congress in the Fair Labor Standards Act (FLSA) is not within the authority of the DOL.

The court indicated that an exempt salary level should function to “screen out obviously nonexempt employees,” making an analysis of duties unnecessary. But the DOL’s figure of $47,476 doesn’t just rule out employees that clearly don’t qualify; it makes the duties tests irrelevant, the court says.

Details still in motion

While this ruling is more conclusive than the court’s original injunction, the DOL had already indicated that it would reconsider an appropriate salary level. The agency has already issued a request for information, asking the public for input on a new salary level and how updates to that figure should be made.

Meanwhile, there is also an appeal pending in the Fifth Circuit Court of Appeals on the district court’s November injunction. But that appeal may now be moot—the government has asked the court to put oral arguments (scheduled for October 3) on hold pending further developments.

While the appeal on the original injunction could fizzle out, we may still see an appeal based on the district court’s August 31 decision that the rule is invalid.

For employers, no immediate effects should be felt from this decision. They weren’t required to implement the new salary level because of the November injunction (though many had already reclassified employees), and they’re not required to do so now.

This article was written by Katie Loehrke of J. J. Keller & Associates, Inc.